Toll Group Sells Railway Share to Royal Group

www.cambodiadaily.com, By | December 23, 2014

Australian logistics company Toll Group announced Monday that it has sold its entire 55-percent stake in Cambodia’s railway project to its partner in the venture, Royal Group, for an undisclosed sum, citing poor revenue and setbacks.

In a media release, Toll Group’s managing director Brian Kruger said that Royal Group, chaired by local tycoon Kith Meng, will take the reins as 100-percent owner of the Toll Royal Railway concession, after the venture failed to meet expectations.

“The decision to divest our interest in the concession was not taken lightly, but it was decided after generating lower-than-expected returns over a period of time,” Mr. Kruger said.

Mr. Kruger said that disruptions to rehabilitating the track under a $143-million project spearheaded by the Asian Development Bank (ADB) made the venture unprofitable.

“In addition, setbacks and delays in track rehabilitation works by external contractors over the past two years has in our view also impeded the efficient operation, and hence economic viability for Toll.”

The ADB conceived the railway project in 2006 to make Cambodia’s economy more competitive by easing the movement of goods across the country.

In 2009, the government and Toll Royal Railway signed a 30-year concessional agreement in which the private venture assumed responsibility for the railway’s operation and maintenance.

But today, only the 256-km southern line from Phnom Penh to Sihanoukville is operational, while plans to develop the 335-km stretch from Phnom Penh to Poipet City remain in limbo due to a lack of funds.

Careless planning and poor implementation of the project, the ADB conceded in a report earlier this year, has resulted in thousands of families—who have had to give up their land to make way for the railway—worse off than they were before the project began.

Contacted Monday, Toll Royal Railway’s chief operating officer, John Guiry, said the railway would continue operating as usual, despite Toll Group no longer having a share in the venture.

“There’ll be no difference at all —business as usual. Toll will provide advice and direction to Royal Group and provide logistics [expertise] and warehouse equipment,” he said.

Mr. Guiry said Toll Group’s move comes as the company is reviewing and exiting its less profitable investments.

“To be honest with you, I think Toll wanted out of it,” he said. “And they’re looking at us and saying…it’s not going to achieve what we thought, so why are we going to need it?”

Royal Group chief financial officer Mark Hanna could not be reached Monday.